CPB Discussion Paper 116
European natural gas markets: resource constraints and market power
ISBN: 978-90-5833-387-2
The European natural gas market is characterized by declining indigenous resources, particularly
in the UK and the Netherlands, and a growing dependence on a small number of large exporters
who, as a consequence, see their market power increasing.
In this paper we analyze long-run scenarios for the European natural gas markets in a model,
NATGAS, that explicitly includes both factors, resource constraints and producers’ market
power.
We analyze the impact of conditions on the global LNG market on market shares of pipeline gas
suppliers, as well as on the speed of depletion of indigenous European resources. We focus on
how shadow prices of resource constraints affect substitution patterns in the various scenarios.
Keywords: European natural gas market, complementarity model, market power, resource rent.
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